Unit 3 Business Finance - Cash flow and Breakeven

Label the break-even chart

a

b

c

d

e

Total Revenue

Total Costs

Fixed Costs

Contribution Per Unit

Margin of Safety

Break-even point

Cash Flow

Match the Break-even formulas up

• Selling Price x Quantity Sold

• Total Revenue

• (Total Costs – Fixed Costs) / Break-even

• Profit

• Selling Price – Variable Costs Per Unit

• Break-even Point

• Contribution Per Unit x Margin of Safety

• Variable Cost Per Unit

• Fixed Costs / Contribution Per Unit

• Contribution per Unit

Sort the fixed costs, variable costs and sales into the columns

Groups:

(a) Fixed Costs

,

(b) Variable Costs

,

(c) Sales

• Cash Sales

• Credit Sales

• Salary

• Rent

• Overtime Pay

• Raw Materials

A tennis coach offers hourly one to one lessons for £25.50. Their total fixed costs are £14985 and the variable costs per lesson are £5.25. Calculate the number of lessons (output) they need to break-even.

Answer explanation

Formula = total fixed costs/contribution per unit

The number of lessons to break-even each year =

£14 985 / (£25.50 - £5.25) = 740 lessons

Sort the inflows and the outflows

Groups:

(a) Inflows

,

(b) Outflows

• loans

• Credit purchases

• cash sales

• Utilities

• capital introduced

• Rates

• Wages

• sale of assets

What L measures the ability of a business to pay its short-term debts.

What is the net cash flow in January?

What is the closing balance in January?

What is the opening balance in February?

What is the closing balance in February?